Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “How the Tax Burden Has Changed”

As I said in an earlier comment, we have to redefine what the word “Income” means.

What difference does it make if I earned $10,000:

1) As an employee in wages
2) As a business owner in profits
3) As an investor in capital gains or divdands
4) Or a saver in Interest.

This is ALL Income as far as I can tell and by changing the definition it impacts:

A) Revenues
B) Social Security funding and disbursements
C) Medicare

So what difference does it make how we make our Income…it is Income. All this slicing and dicing is just to confuse the issue. We need a simple and straight forward tax code. The longer and more convoluted it is the worse it will be for the majority of Americans.

The MMT guys have this right , everyone else has it wrong. Tax policy is more about monetary policy than anything else. Too many dollars around raise taxes or interest rates to sop it up. We don’t actually borrow money before we spend it.

“…The longer and more convoluted it is the worse it will be for the majority of Americans…”

Conan,

you may find it worthwhile to see some of..

“Teddy Roosevelt and the Progressive Vision of History
by BURTON FOLSOM

Over a hundred years ago, on August 31, 1910, Teddy Roosevelt gave his famous “New Nationalism” speech in Osawatomie, Kansas. In that speech the former president projected his vision for how the federal government could regulate the American economy. He defended the government’s expansion during his presidency and suggested new ways that it could promote “the triumph of a real democracy.”

Roosevelt’s quest for “a real democracy” and for centralizing power was a clear break with the American founders. James Madison, for example, distrusted both democracy and human nature; he believed that separating power was essential to good government. He urged in Federalist No. 51 that “those who administer each department” of government be given “the necessary constitutional means and personal motives to resist the encroachments of others. . . . Ambition must be made to check ambition.” If power was dispersed, Madison concluded, liberty might prevail and the republic might endure.

Roosevelt argued in this speech that the recent rise of corporations gave businessmen too much economic control. Madison’s constitutional restraints, therefore, allowed too much wealth to be concentrated in too few hands. Redistribution of wealth by government, Roosevelt thought, would achieve “a more substantial equality of opportunity.”

The economic power of railroads triggered Roosevelt’s ire during his presidency. He was frustrated that railroads gave rebates to large customers. In effect, the railroads charged varying rates for carrying the same products the same distance. Roosevelt thought rates should be roughly similar for large shippers and small shippers, especially if the small shippers were far from major cities.

He posed the problem this way: “Combinations in industry are the result of an imperative economic law which cannot be repealed by political legislation. The effort at prohibiting all combination has substantially failed. The way out lies, not in attempting to prevent such combinations, but in completely controlling them in the interest of the public welfare.”…”

Based on trickle-down economics theory, we should be in the middle of one of the great booms of all time. The GOP interpretation of the Laffer Curve would indicate that we should be at close to peak income tax collection. Why is neither occurring right now?

Capital gains are taxed lower to (aledgedly) index for inflation. Dividends are taxed lowee because corporations were buying back shares to give shareholders the dividend as capital gains which clearly isn’ t in the common interest. Does anyone know why they show the maximum payroll tax more than 6% + 1.8%?

~~~

BR: Your comments are incorrect.
No, Capital gains taxes are not indexed to inflation.
No, Dividends are not taxed lower due to share buybacks.

Commenting is a privilege not a right. I dont allow incoherent junk on the site.

Whcih notes that the top 20% of income earners contribute 65% of all taxes collected, NOT just Federal income taxes, where the percentage increases to over 80%.

IMHO, for a fair debate the percentage of income paid in taxes DOES need to be considered alongside the ABSOLUTE amount of tax paid (And the % of total tax receipts) paid by each group.

The Left always come back with “Well the top 20% pay 65% of all taxes because they have 65% of all the income” which, at least according this source is NOT correct, the actual eing about 60%. But lets be generous and say that it is ABOUT 65%, in which case, the top 20% is demonstrably already paying its fair share?!

Roughly speaking, 46% of Federal receipts come directly from the bottom 85%, while income taxes are taxed in proportion to earnings.

To provide historical context, in 1913, the year of enactment of the modern income tax single persons earning $3,000 and couples earning $4,000, were exempted from taxation. In constant dollars, that would be roughly $52,000 for single income and $65,000 for couples, well above today’s median income for single earners ~$21,000 & $50,000 couples. Income tax was in enacted to provide relief to the upper classes (and the retailers who catered to them…think Marshall Fields et al) who complained of the high tariffs on luxury goods they imported from abroad.

In short, the rich created income tax to dodge taxes…file under: You Don’t Pay That Much, but Stop Complaining, You Have Only Yourself To Blame.

“The three main sources of federal tax revenue are individual income taxes, payroll taxes, and corporate income taxes; other sources of tax revenue include excise taxes, the estate tax, and other taxes and fees.

Almost half of all federal revenue (47 percent) comes from individual income taxes. The income tax is generally progressive: higher-income households pay a larger share of their income in income taxes than lower-income households do.

Another 36 percent of revenue comes from payroll taxes, which are assessed on the wage or salary paychecks of almost all workers and used to fund Social Security, Medicare Hospital Insurance, and unemployment insurance. By law, employers and employees split the cost of payroll taxes, but research has shown that employers pass their portion of the cost on to workers in the form of lower wages.

Payroll taxes as a whole are regressive: they collect a higher percentage of total earnings from lower-income workers than higher-income ones. One reason is that the Social Security component of the payroll tax applied only to a worker’s first $106,800 of earnings in 2011 ($110,000 in 2012). Another reason is that payroll taxes do not apply to dividends, capital gains, or other unearned income, which constitute a much greater portion of higher-income peoples’ earnings.

Corporate income taxes make up about 8 percent of federal revenue, with the remaining 9 percent coming from excise taxes, estate taxes, and other taxes. Excise taxes are collected on the sale of certain goods (e.g., fuel, alcohol, and tobacco); they are intended to raise revenue and, in some cases, discourage consumption of the taxed product. These made up about 3 percent of federal receipts in 2011. The estate tax is a tax on assets such as cash, real estate, or stock that are transferred from deceased persons to their heirs. Because the first $10 million of a married couple’s estate is exempt from the estate tax, and because of other special exemptions from the estate tax, fewer than the wealthiest two of every 1,000 estates nationwide will owe any estate tax in 2012. Estate tax revenues made up 0.3 percent of total federal receipts in 2011.”

These charts suggest that the greatest tax injustice is not the shifting of the burden from the wealthy to the poor; it’s the shifting of the burden from retirees to workers (via the payroll tax) and from adults to children (via increased debt).

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About Barry Ritholtz

Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

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